Uyboco: Bitcoin: Beyond the hype

These are the questions I most often hear from people asking me about bitcoin. I heard this question back when bitcoin rose from a lethargic $200 to upwards of $300. I heard it when bitcoin hit $700, then $1000, then $2000 and $3000 and I’m still hearing it even until now.

When I began writing about cryptocurrency last June, the price of bitcoin had hit an all-time high of $2,800. Today, it is December and bitcoin had just broken past $10,000. That means if you had bought bitcoin last June and simply held on until today, you would have made four times your money’s worth in six months.

This year alone, I have seen more people becoming interested in bitcoin than I have in the previous 2 years combined. The reactions are varied -- some want to jump in immediately while others are skeptical and holding back.

Just this morning, I read two articles -- one was from a local politician warning people against investing in bitcoin and other cryptocurrencies and the other was a comparison between bitcoin and email.

The warning had some valid points -- that people should not pour their life savings into this, that prices are volatile and have no safeguards in place -- this is sound advice that I myself also give to others.

The politician further said that, “Investors stand to lose everything overnight if exchange platforms for cryptocurrencies shut down or when the consumer’s virtual wallet containing confidential information is hacked or stolen” -- and while that is true, there are also safety measures one can take to prevent that. The risk you take in leaving your currencies with an exchange is similar to the risk you take leaving your money in the bank. If the bank shuts down, there goes your money as well. Besides, it is possible to take your cryptocurrencies out of exchanges into your own private offline wallet - so that is virtually unhackable.

Life is one big risk. The key to investments, like life, is not avoiding risk, but managing it -- and one manages risk by increasing one’s knowledge about the matter. The more you know, the better your decisions will be.

So yes, if you are too lazy, too unmotivated, or too uninterested to learn about cryptocurrencies, then I suggest you heed Mr. Politician’s advice and stay away. As my friend says, “Crypto is not for the weak of heart. It is an emotional roller coaster ride.”

The other article was more interesting, as it pointed out that for all the hype surrounding bitcoin, still less than 1% of the world’s population are using it, much less really understand it. The writer compares bitcoin today as similar to email, which was invented as far back as 1972. Twenty-two years later, in 1994, only 0.25% of the population were using it, but it quickly gained traction after that and another twenty-three years later today, well, who hasn’t heard of or learned to use email?

What is essential to understand about bitcoin is that it is not just some kind of money that sits on thin air. Its value does not rest on pure speculation alone. Yes, there are many casual investors jumping on the bitcoin bandwagon wanting to get rich quick.

But beyond that, bitcoin is built on the revolutionary technology called the blockchain and those who understand what that is all about know that will forever change the landscape of how programmers understand how information is stored and transmitted, how transactions can be truly "trustless," and how decentralization works.

For those who understand, that is what we are putting our money on, and that is the vision you must embrace when you are in it for the long term. It’s not just about buying low and selling high. It’s about seeing a future where we pay and get paid in currency that we control, not our banks nor our governments.

So is it the right time to buy? Is it too expensive? I don’t know, it depends on how you see the future. Perhaps you’ll decide to take the plunge, or perhaps you will still be asking yourself the same question at this time next year.